Public Sector Predictions for Healthcare Utilization in 2024

Written by Jordan Tussy, Colin McDermott, and Madi Whyde

Contributing researchers: Bill Jordan, Ryan Mendez, Molly Smith, Rashika Tomar, and Michael Welcer

The public sector often provides valuable insights on broader industry trends, which may be particularly helpful for the private sector in planning for the 2024 calendar year and beyond. VMG Health has identified a select number of companies that operate within the healthcare sector and reviewed the latest earnings calls to develop an understanding of how recent financial and operational trends may provide an indication of future utilization. Identified companies include distributors, equipment suppliers, facility operators, and managed care organizations, all of which are integral in the deployment of healthcare services in the United States and deeply invested in the underlying drivers of future utilization. 

We have included some of the most interesting statements made by the leaders of these organizations below. 

For medical equipment suppliers and distributors, 2024 predictions were primarily driven by 2023’s utilization, with many companies reporting continued growth over 2023 due to persisting patient backlogs.  

“…Average system utilization [procedures per installed clinical system] continues to be above long-term trends, increasing by 9.0% for the full year of 2023. Higher system utilization reflects both a higher mix of shorter-duration, benign procedures and the need to address patient backlogs.” – Jamie E. Samath, Senior Vice President and Chief Financial Officer, Intuitive Surgical, Inc. FQ4 Earnings Call, January 23, 2024. 

“During the quarter, we saw strong procedural demand… Additionally, demand for our capital products remained very robust in the quarter, with double-digit organic growth in Medical, Instruments and Endoscopy.” – Jason Beach, Vice President of Investor Relations, Stryker Corporation. FQ4 2023 Earnings Call, January 30, 2024. 

“Second quarter revenue increased 3.0% to $3.9 billion, which, as Jason alluded to, reflects quarterly revenue growth for the Medical segment for the first time in over two years. This increase was driven by growth in both at-home solutions and global medical products and distribution…” – Aaron E. Alt, Chief Financial Officer, Cardinal Health, Inc. FQ2 2024 Earnings Call, February 1, 2024. 

“There is a bolus of patients coming out into the market after COVID-19, which has made 2023 market growth faster than historical averages.” – Joaquin Duato, Chief Executive Officer and Chairman, Johnson & Johnson. FQ4 2023 Earnings Call, January 23, 2024. 

As key customers of medical equipment suppliers and distributors, healthcare operators mirrored their observations of continued growth in utilization, particularly in the fourth quarter of 2023. 

“But at a structural level, there is nothing to suggest that our surgical volume trends are going to change for the year, we had really solid volume growth in surgery. And we continue to invest heavily in our programs, both on the outpatient side and supporting our inpatient activity with more acute in complex program offerings.” – Samuel N. Hazen, Chief Executive Officer and Director, HCA Healthcare, Inc. FQ4 2023 Earnings Call, January 30, 2024. 

“We finished the year strong and delivered results in the fourth quarter that were well above the expectations we set. This was driven by continued volume strength as well as cost and utilization management.” – Saum Sutaria, Chairman and Chief Executive Officer, Tenet Healthcare Corporation. FQ4 2023 Earnings Call, February 8, 2024. 

These companies were also consistent in crediting the elevated utilization trends to volume growth in a few key specialties. 

“As we have noted, we believe that in 2023, we saw recovery in demand that included some impact from deferred volume, particularly in GI and ENT services. – Saum Sutaria, Chief Executive Officer, Tenet Healthcare Corporation. FQ4 2023 Earnings Call, February 8, 2024. 

“Throughout the year, we saw ongoing strength and recovery in GI, urology and ENT procedures. This organic growth was driven by continued expansion of service lines and growth in our population of partnered and affiliated physicians as well as the fundamental tailwinds of patient demand for safe and convenient surgical care options.” – Saum Sutaria, Chief Executive Officer, Tenet Healthcare Corporation. FQ4 2023 Earnings Call, February 8, 2024. 

“Starting first with procedures, growth for the full year was 22.0%. Areas of strength included general surgery in the United States… In the U.S., general surgery procedure growth was led by cholecystectomy, with foregut procedures rising as well. Colon and hernia procedure growth was also healthy for the year. Bariatric procedures grew year-over-year.” – Gary S. Guthart, Chief Executive Officer and Director, Intuitive Surgical, Inc. FQ4 2023 Earnings Call, January 23, 2024. 

While volume recovery resulted in top line revenue growth for operators and their vendors, payors expressed higher-than-expected medical costs driven by the strong utilization.  

“…In the non-inpatient space, despite the recent decline in observation events, we saw a sequential uptick in overall medical cost per member per month (PMPM) in the fourth quarter, driven largely by increases in physician, outpatient surgical and supplemental benefits cost categories.” – Humana Inc. Fourth Quarter 2023 Prepared Management Remarks, January 25, 2024. 

“Care patterns remain consistent with those we shared with you in the first half of ‘23. Activity levels continue to be led by outpatient care for seniors—with orthopedic and cardiac procedure categories among the more prominent. As we’ve noted, our benefit design approach assumed these activity levels persist throughout ’24, and the care patterns we observed exiting ’23 reconfirm that decision.” – John Rex, Chief Financial Officer, UnitedHealth Group. FQ4 2023 Earnings Call, January 12, 2024. 

2024 Expectations

The companies were nearly unanimous in their expectations that 2023 growth trends will persist throughout 2024, driven by the elevated backlogs, stabilizing macroeconomic trends, and an aging population.  

Healthcare Manufacturers and Distributers  

“We project MedTech operational sales growth to be relatively consistent throughout the year, expecting procedures in 2024 to remain above pre-COVID levels.” – Joseph J. Wolk, Executive Vice President and Chief Financial Officer, Johnson & Johnson. FQ4 2023 Earnings Call, January 23, 2024. 

“And we see that trend [faster market growth post-COVID] continuing into a good part of 2024. And therefore, being a tailwind into 2024. There’s a lot of factors playing into that. But overall, we see the amended procedures continuing into, at least, the first half of 2024.” – Joaquin Duato, Chief Executive Officer and Chairman, Johnson & Johnson. FQ4 2023 Earnings Call, January 23, 2024. 

“…We continue to see an increased volume of procedures in orthopedics based on coming out of COVID. And we don’t see any change in that, neither in the hips or in the knee area, or in any of the segments that we compete. So, we are optimistic about our orthopedics trajectory.” – Joaquin Duato, Chief Executive Officer and Chairman, Johnson & Johnson. FQ4 2023 Earnings Call, January 23, 2024. 

“So, embedded in the guidance for 2024, which we’re very confident on the 5.0% to 6.0%, is macro and micro reasons. So, from a macro perspective… the markets are going to continue to be healthy. You got better patient demographics, younger patients, you got the dynamic of cases moving into an ASC… You’ve seen shorter, better rehabilitation processes.” – Ivan Tornos, Chief Operating Officer, President, Chief Executive Officer, and Director, Zimmer Biomet Holdings, Inc. FQ4 2023 Earnings Call, February 8, 2024. 

“The size of our pipeline is twice what it used to be in 2018… This is not the same market growth profile that we used to have. Patient demand is strong. Procedure volume is very strong given a variety of reasons.” – Ivan Tornos, Chief Operating Officer, President, Chief Executive Officer, and Director, Zimmer Biomet Holdings, Inc. FQ4 2023 Earnings Call, February 8, 2024. 

“Procedure volumes are strong. The capital markets are very strong. Hospitals are spending. We have exited the year with more backlog than we began the year, which means, obviously, our orders are continuing to be strong for capital equipment.” – Kevin A. Lobo, Chairman, Chief Executive Officer, and President, Stryker Corporation. FQ4 2023 Earnings Call, January 30, 2024. 

“We continue to expect the ortho markets will remain strong in 2024, driven by continued adoption in robotic-assisted surgery, demographics, a more favorable pricing environment, and healthy patient activity levels with surgeons… Hospital CAPEX budgets remain healthy, and our capital order book remains elevated as we enter 2024.” – Jason Beach, Vice President of Investor Relations, Stryker Corporation. FQ4 2023 Earnings Call, January 30, 2024. 

“Based on our momentum from 2023, strong procedural volumes, healthy demand for capital products, and a stabilizing macro-economic environment, we expect 2024 organic net sales growth to be in the range of 7.5% to 9.0%.” – Glenn S. Boehnlein, Vice President and Chief Financial Officer, Stryker Corporation. FQ4 2023 Earnings Call, January 30, 2024. 

“…Our overall procedure guidance range assumes that growth moderates from last year, given the elevated backlog benefit we experienced in 2023.” – Brian King, Head of Investor Relations, Intuitive Surgical, Inc. FQ4 2023 Earnings Call, January 23, 2024. 

“…Utilization continues to be quite good and predictable. So, we’re in a nice environment for ongoing growth…” – Jason M. Hollar, Chief Executive Officer and Director, Cardinal Health, Inc. FQ2 2024 Earnings Call, February 1, 2024. 

Healthcare Operators

“The volume strength was also very good during the year. And so, I think that we believe that we’ll continue to see acute care recovery in 2024 like we saw in 2023. And if we’re able to open up capacity effectively to service the demand that we want, which again is consistent with our high acuity strategy, I think that’s what gets us to the upper end of our guidance, right? It’s really the volume potential there.” – Saum Sutaria, Chief Executive Officer, Tenet Healthcare Corporation. FQ4 2023 Earnings Call, February 8, 2024. 

“…I think we’re reading continued strong demand. We saw really strong enrollment in the health insurance exchanges across our states… We believe we continue to see strong economic indicators and employments and our access to contracted lives remaining well.” – William B. Rutherford Executive VP and Chief Financial Officer, HCA Healthcare. FQ4 2023 Earnings Call, January 30, 2023. 

“…We are really judging our business and thinking about 2024 optimistically around where the demand for healthcare is at least in our markets.” – Samuel N. Hazen, CEO and Director, HCA Healthcare. FQ4 2023 Earnings Call, January 30, 2023. 

“Our initial assumption for volume growth assumes that volume will build as the year progresses, reflecting the historically high same-store case growth that we saw in the first quarter of 2023. We are very confident in the long-term growth rates of this business.” – Saum Sutaria, Chief Executive Officer, Tenet Healthcare Corporation. FQ4 2023 Earnings Call, February 8, 2024. 

Managed Care

“Given the recency and magnitude of the uptick in the utilization trend, we have prudently assumed that the higher costs seen in the fourth quarter persist throughout 2024. Based on our review of our initial claims data, we believe that the seasonal factors are not driving the increase.” – Bruce Dale Broussard, Chief Executive Officer and Director, Humana Inc. FQ4 2023 Earnings Call, January 25, 2024.   

“Looking at January data, which is very early—so we only have really some look into the first two weeks—we would say [utilization] is continuing to stay at the elevated levels that we saw in the fourth quarter.” – Susan Marie Diamond, Chief Financial Officer, Humana Inc. FQ4 2023 Earnings Call, January 25, 2024. 

Conclusion

The prevailing theme noted in the earnings calls VMG Health reviewed pertained to the elevated utilization in 2023 and its persistence into 2024. Particularly notable were the trends around volumes recovering post-COVID (especially for otolaryngology, orthopedics, and urology services). This was coupled with a recovering macroeconomic environment and favorable patient dynamics. While an encouraging trend for operators, device companies and distributors, higher utilization translated to increased medical claims on the payor side. 

Based on this commentary and insight from the public sector, the VMG Health team is optimistic that 2024 will be a strong utilization year for our healthcare service provider clients.